KKR & Co LP is setting up its first deals team in Singapore as the U.S. private equity firm seeks to invest about $1 billion in Southeast Asia through its second Asia fund, sources with knowledge of the matter said.

Competition is heating up for a new wave of investing opportunities in countries from Vietnam to Malaysia, prompting buyout funds including KKR to allocate more resources to the fast-growing emerging markets of Southeast Asia.

Global buyout funds such as CVC Capital Partners and TPG Capital have already established Singapore offices and built teams there to specifically invest in Southeast Asia.

Under the new plan, KKR will have as many as eight deal makers in Singapore, with regional leader Ming Lu continuing to head KKR's Southeast Asia team based out of Hong Kong, the sources said.

That team includes Ridha Wirakusumah, formerly president and CEO of Bank Internasional Indonesia, one of the country's largest banks, the sources said, declining to be identified because they are not authorised to speak to the media.

Kabir Mathur, a director and ex-TPG executive, and David Tan, a principal who played a key role in KKR's previous Southeast Asia investments in Masan Consumer Corp and Unisteel, will also be part of the team, they added.

Blackstone Group LP and General Atlantic are also opening Singapore offices, while Warburg Pincus and Bain Capital are hunting for executives to build their Southeast Asia teams, according to sources familiar with the matter.

Bain, KKR and Warburg Pincus declined to comment.

The increased focus on Southeast Asia comes as private equity deal volumes in the region jumped nearly 44 percent year-to-date to $609.4 million, according to Thomson Reuters data.

The last round of Asia funds focused heavily on leveraged delistings of Singapore tech firms as a way to tap Southeast Asia. The new wave will increasingly target companies with strong growth dynamics in markets like Indonesia.

Headhunters say they face rising demand for Indonesians as private equity firms look for an inside edge on deals in Southeast Asia's biggest economy.

Myanmar is also attracting private equity attention as Southeast Asia's newest frontier market as sanctions on the former pariah state fall away.

FIRST CLOSE

KKR has reached a first close of $3 billion for its $6 billion Asian fund, according to a source familiar with the matter. If it hits the target, KKR Asian Fund II would be the largest ever private equity fund raised for the region.

The first close on KKR Asian Fund II comes around six months after the launch of the fund despite a tight market for fundraising.

The U.S. buyout fund is competing for investor dollars against global and local rivals including TPG and RRJ Capital, both of which are raising new pan-Asia funds of up to $5 billion..

RRJ Capital, founded by Malaysian-born former Goldman Sachs banker Richard Ong, has also raised $3 billion in commitments so far, according to a source familiar with the matter.

KKR, which has yet to land any deals in Indonesia, completed Vietnam's largest-ever private equity investment in 2011. It struck a deal to pay $159 million for 10 percent of Masan, underscoring buyout funds' appetite for Asian consumer-linked plays.

Investors in the new KKR fund, focusing on consumer goods, manufacturing, healthcare and infrastructure projects, will include Oregon Investment Council. Oregon also invested in KKR's first Asia fund, which has posted net returns of 19 percent, according to an Oregon statement.

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